Seminar
Past
Evaluating Monetary Policy Counterfactuals: (When) Do We Need Structural Models?
Alisdair McKay
- Date18 June 2025
- Time 15h00 - 16h00
- Room Room 6 Grand Hall and video
Abstract
To evaluate the evolution of the macro-economy under alternative assumptions on monetary policy, it suffices, under weak structural assumptions, to know the causal effects of monetary shocks on macroeconomic outcomes. The existing empirical literature estimates the effects of monetary shocks to the short end of the yield curve, thus allowing the evaluation of counterfactuals that change assumptions on near-term policy. If the contemplated policy changes are instead more persistent, then model structure becomes necessary, for one sole purpose: to extrapolate from the estimated short-end effects to those of policy shocks further out on the yield curve. Among popular models of monetary policy transmission, market incompleteness (i.e., “HANK”) does not change this extrapolation much, while behavioral frictions do.
Related document(s)
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